Shares in Britain's top banks suffered further deep losses today as fears about the fallout from Brexit sparked a litany of earnings downgrades and sell-offs by shell-shocked investors. 

Shareholder anxiety about Britain's decision to quit the European Union escalated despite calls for calm from British finance minister George Osborne after a weekend of political chaos in Britain and the euro zone.

Barclays, Lloyds Banking Group and Royal Bank of Scotland were among the hardest hit with falls of 11%, 9% and 14% respectively in dramatic early trading.

Those losses sent the STOXX Europe 600 bank index to its lowest since June 2012. 

After lauding efforts by banks to cut costs, streamline operations and beef up balance sheets in recent months, a string of analysts said the likelihood of catatonic interest rates and falling credit demand in the wake of Brexit had put earnings prospects and dividend growth at risk. 

"The market is justifiably concerned about the sustainability of earnings in a macroeconomically uncertain environment, and the ability to withdraw excess capital," RBC Capital said, in a note that slashed its price targets for British banks by 30%.

"UK rates markets are now pricing in a 25 basis point rate cut and no rate increases again until 2019. It seems at least that the uncertainty will lead to an economic slowdown," RBC said. 

European banks did not escape. 

Barclays analysts downgraded earnings expectations for a slew of continental lenders including Bankia, Banco Populare, Intesa, UBI and Unicredit, citing rising political risk and fading hopes for a lower cost of equity. 

"The risks of anti-EU contagion, coupled with a number of binary events in the coming months - an Italian referendum in October, US, French and German elections beyond this - suggest it will be difficult for banks' costs of equity to fall anytime soon," the Barclays note said. 

A spokesman for Italy's Economy Ministry said today the government was looking at various options to try and prop up the country's bank stocks.

After double-digit stock falls on Friday, investor nerves were frayed further by the resignation of EU Commissioner Jonathan Hill on Saturday.

Hill was the man many hoped would renegotiate 'passporting' privileges that have turned British financial services into the country's most lucrative exporters. 

JPMorgan used its note to highlight the mounting challenges faced by lenders with significant investment banking operations, cutting 2018 earnings per share estimates for the sector by 28% and rewriting recommendations for Morgan Stanley, Goldman Sachs, Deutsche Bankm UBS and Credit Suisse. 

"European investment banks are to be avoided considering our inability to assess short-term counterparty, liquidity, and market-gapping risk, but also structural uncertainty such as the risk of losing EU passporting, which would lead to net additional staff and costs for investment banks," JPMorgan said.

JPMorgan estimated average 13% earnings per share cuts in both 2017 and 2018 for European banks, on the back of lower loan growth and expected increases in both bank funding costs and bad debt provisions. 

It downgraded all domestic-focused UK lenders to neutral and underweight positions but joined rival analysts at Deutsche Bank in conferring preferred status on Asia-focused Standard Chartered and Europe's largest bank HSBC, describing both as defensive options.